TriQuint Lowers Sights
Revenues from the recently acquired optoelectronics division of Agere Systems (NYSE: AGR.A) should be $30 million to $40 million for the fiscal year, TriQuint executives told analysts on a conference call yesterday. That's down from an initial guess of $50 million to $75 million (see TriQuint to Acquire Agere's Optics).
Overall, TriQuint warned that revenues for fiscal 2003, which ends in December, would be lower than expected, hitting a range of $290 million to $310 million, as opposed to a previously predicted range of $320 million to $340 million. Losses for the year should be 26 cents to 36 cents per share, compared with the company's previous estimates of 20 cents to 26 cents, officials said.
The revenue outlook for the second fiscal quarter, which ends this month, remained unchanged: flat to slightly higher compared with last quarter's $71.7 million. TriQuint plans to report its second-quarter earnings on July 24.
TriQuint's stock fell $1 to trade around $4.40 late today.
The impetus for TriQuint's new numbers wasn't optical so much as a lull in demand for CDMA handsets, which in turn is affecting demand for TriQuint's wireless chips. "When we check with our contacts in the field we're not hearing positive signs about a quick correction associated with SARS. We hear the reports about the phone sales in China being off 50 percent in some cities, and concern about inventory buildup," said Ray Lane, TriQuint CFO, during the call.
Another factor is the delay in Samsung Corp.'s CDMA rollout in India, which TriQuint and others have mentioned previously.
While they were at it, though, TriQuint executives announced the lower numbers for the optical business. "I think what they did was cut numbers in general," says Sandy Harrison, an analyst with Pacific Growth Equities Inc.
It's the second time TriQuint has lowered its revenue estimates for the Agere business, which the company acquired in January. The number had fallen to a $50 million to $60 million range with the company's first-quarter earnings report in April (see TriQuint Q1 Revenues Climb). But this time, it looks as if the lower number will stick, says Earl Lum, analyst with CIBC World Markets.
"It looks like they're at a more reasonable revenue target," Lum says. "Their earlier estimates were too optimistic."
TriQuint's also had to contend with the sudden rise of Avanex Corp. (Nasdaq: AVNX) as an optical powerhouse, with that company's pending acquisitions of components divisions from Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Corning Inc. (NYSE: GLW) (see Avanex to Buy Alcatel, Corning Units and Avanex Deal Reshapes Sector).
But Avanex is probably not a factor for TriQuint just yet. Agere customers haven't necessarily jumped ship. "I don't know if you can make a fair assessment at this point in the cycle as to whether [TriQuint is] winning or losing," says Harrison. "You have to see improvements in the market before you can make that assessment."
TriQuint's lowered expectations shouldn't be cause for alarm, Harrison says. It's just an indication that TriQuint -- like many companies in this market -- is trying to find its way.
"They've got a company that's morphing, in markets that are morphing at the same time," namely wireless and optical, Harrison says. "It's like a drunk chasing a snake."
On the conference call, TriQuint CEO Ralph Quinsey repeatedly stressed TriQuint's faith in optics. "That business is not declining quarter-to-quarter any more, as it had been for many quarters prior to the acquisition. I think we're at the bottom now," Quinsey says.
Current speculation holds that TriQuint is interested in Agere's lasers and detectors -- the main ingredients of a transponder -- and has put the rest of the division up for sale (see TriQuint Closes Agere Acquisition and JDS Goes Undersea). TriQuint's plan should come to light on June 17, when TriQuint executives host an analysts' day at the ex-Agere facility in Breinigsville, Pa.
Optical analysts did get one nibble of information from yesterday's call. Quinsey mentioned that TriQuint wants its optical business to attack the metro and enterprise markets -- and that the Agere product line is primarily metro.
— Craig Matsumoto, Senior Editor, Light Reading